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New research shows scale of platform margin squeeze

Polson-Mark-Lang Cat-2013
The Lang Cat principal Mark Polson

New research figures have exposed the continuing squeeze on platform margins, with total income compared with assets under administration halving over a five–year period.

A study by consultancy and software provider Altus shows platforms’ total revenue in comparison with AUA fell from 80bps to 40bps between 2006 and 2011.

As only half of UK adviser platforms have released their full 2012 figures, the paper gives the most up-to-date picture of the falling margins in the platform space. 

Altus predicts a further squeeze on margins in coming years.

The research, carried out across the biggest 20 UK platforms, shows total revenues of £740m for 2011 compared with revenues of £330m for 2006 with total expenditure increasing to £790m from £380m at the end of 2006.

Across the period, cumulative costs amounted to £3.5bn while total revenues stood at £3.15bn. Total platform AUA rose from around £40bn in 2006 to £176.4bn in 2011.

The highest average AUA per platform employee at the end of 2011 stood at £70m while the lowest average was £2m.

The Lang Cat principal Mark Polson says: ”Platforms need to be able to ensure most of the heavy lifting is done by technology and not have to hire more administration staff when large amounts of new assets are added to the platform.”

Altus consultancy director Kevin Okell says: “At the  moment there is a disturbing correlation between the growth curve we can see in AUA and the costs which the industry accepts as a result of this. The failure to date of the industry to see any real economies of scale paints a worrying picture and one that many investors and analysts would under normal circumstances find alarming.”

Murphy Financial senior partner Adrian Murphy says: ”This shows how far platforms’ margins have been squeezed and how much they need to increase the efficiency of technology.”

Altus platform growth


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